ASX 200 company to rake it in now after COVID cost cuts: expert

The COVID-19 pandemic was as terrible for many businesses as it was for individual health and freedoms.

Industries that relied on movement of people came to an absolute standstill, and ASX-listed companies in those areas had to figure out how to survive on almost zero revenue.

But those who made it through the other side are now looking slim, fit and ready for supercharged earnings, unencumbered by high costs.

Morgans senior analyst Belinda Moore named one such ASX share that she’s currently bullish on:

‘Management hasn’t wasted a crisis’

Travel agent Webjet Limited (ASX: WEB) understandably was in deep trouble when the coronavirus struck the world and the travel industry pretty much shut down around the world.

The company was forced to cut costs dramatically just to stay afloat. But now, Moore said in a Morgans blog post, that’s paying off.

“With less reliance on international airline capacity and China, and the fact that management hasn’t wasted a crisis with a stronger business coming out of COVID, Webjet is leading the recovery of our travel stocks under coverage.”

The business is already starting to see the benefits of losing excess weight.

“Webjet reported a strong 1H23 result which exceeded expectations,” said Moore.

“Pleasingly, operating cash flow was materially stronger than expected and has further strengthened its already strong balance sheet.”

The Webjet share price gained more than 10% in 24 hours last week after those numbers were revealed to the market.

‘Webjet now deserves a PE rerating’

The company’s wholesale accommodation business WebBeds is leading the way, with earnings before interest, taxes, depreciation and amortisation (EBITDA) already back at 87% of pre-pandemic levels.

“Its EBITDA margin was impressive at 55.7%,” said Moore.

“In September, WebBeds was 35% more efficient on a booking per FTE basis compared to pre-COVID.”

The outlook for the coming year was “upbeat”, with WebBeds on track to top pre-pandemic earnings by 30%.

This has forced a rethink for Moore’s team on the business’ prospects.

“Given Webjet’s stronger than expected result and full year guidance, we have upgraded our FY23 EBITDA forecast by 18.7% to $120 million,” she said.

“With plenty of market share to win over coming years, which should underpin a strong earnings growth profile, whilst generating higher margins than pre-COVID and with a much stronger balance sheet, we would argue that Webjet now deserves a PE rerating.”

The post ASX 200 company to rake it in now after COVID cost cuts: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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